Is Hydrogen Peroxide an FSA Eligible Expense?

A Flexible Spending Account (FSA) helps individuals manage healthcare costs. Many wonder if common items like hydrogen peroxide are eligible for FSA reimbursement. This article clarifies FSAs and the eligibility of healthcare products, including hydrogen peroxide.

What Flexible Spending Accounts Are

A Flexible Spending Account (FSA) is an employer-sponsored benefit that allows employees to set aside pre-tax money from their paycheck to cover eligible out-of-pocket healthcare expenses. These contributions are not subject to federal income tax, Social Security tax, or Medicare tax, providing a tax advantage. The full elected annual amount typically becomes available on the first day of the plan year, even if the employee has not yet contributed the full amount through payroll deductions.

FSAs operate under a “use-it-or-lose-it” rule, meaning any funds not spent by the end of the plan year are generally forfeited to the employer. To mitigate this, employers may offer one of two options: either a grace period of up to 2.5 months after the plan year ends to incur new expenses, or a carryover option allowing a limited amount, such as up to $660 for the 2025 plan year, to roll over into the next year. An employer cannot offer both a grace period and a carryover.

Qualifying Over-the-Counter Expenses

The Internal Revenue Service (IRS) determines which expenses are eligible for FSA reimbursement, generally defining them as amounts paid for the “diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” For an expense to qualify, it must be primarily for medical care, not for general health improvement or cosmetic purposes.

The CARES Act, passed in March 2020, made many over-the-counter (OTC) medications and menstrual care products eligible for FSA reimbursement without a doctor’s prescription, effective January 1, 2020. This expanded eligibility includes items like pain relievers, cold and flu medicines, and various first-aid supplies.

Is Hydrogen Peroxide Eligible

Hydrogen peroxide is generally eligible for reimbursement with a Flexible Spending Account. Its eligibility stems from its common use as a first-aid antiseptic for wound care, such as cleaning minor cuts, scrapes, and burns. It falls under the broad category of medical supplies or over-the-counter medications used for treatment or prevention of disease.

Its medical purpose is key to eligibility. Uses such as disinfecting wounds or treating mouth irritations like canker sores qualify for FSA funds. However, non-medical uses, like general household cleaning or cosmetic applications, are not eligible for reimbursement.

How to Use Your FSA

Using your FSA for eligible expenses typically involves one of two methods. Many FSA plans provide a dedicated debit card, which functions much like a regular debit card but is linked directly to your FSA funds. This card can be used at approved merchants, often pharmacies or stores with specific inventory systems, to pay for eligible medical expenses directly at the point of sale.

Alternatively, individuals can pay for eligible expenses out-of-pocket and then submit a claim for reimbursement from their FSA. For reimbursement, it is essential to keep detailed, itemized receipts. These receipts should include:
The patient’s name
The provider’s name or merchant where the item was purchased
The date of service or purchase
The type of service or item
The total dollar amount paid

While an FSA debit card can simplify the process, retaining receipts is always advisable for substantiation, as the IRS may request them to verify eligibility.